The background appears to be case law concerning a number of companies involved in SDLT avoidance schemes; Inventive Tax Strategies Ltd, Professional Advice Bureau Ltd, Sterling Tax Strategies Ltd, and Bell Strategies Ltd. Under their schemes, the client paid for the advice, which was refunded if the scheme proved unsuccessful.

The companies accounted for output tax on the original invoices. When the schemes proved unsuccessful, they issued credit notes to their customers. Unfortunately, by that time the companies were in liquidation and unable to repay the money. However, the credit notes included VAT adjustments. HMRC paid initial repayments before realising that the moneys were not being repaid. They then issued assessments to correct their error. The companies which were then either in administration or liquidation appealed.

The question to be considered was whether, in the event of a refund, the consideration for the supply had been reduced simply by the issue of the credit note, or whether money was required to be transferred.

I think PVD arts 73 and 90, referred to in the decisions, are clear on this point. They refer to the price obtained or paid. It seems obvious that, if I provide a credit note to a customer, I am obliged to provide money or value to the customer.